Santa Barbara County Courthouse

I took these photographs of the Santa Barbara Historic County Courthouse last summer. The courthouse was completed in 1929. You can read more about it at the Superior Court of California website, and at the Official Website of the Santa Barbara Historic County Courthouse.

MacLean Estate v. Christiansen

As of the date I am writing this post, the law in British Columbia is that if you marry after you make a will, your will is revoked unless there is a declaration in the will that it is made in contemplation of the marriage. This is set out in section 15 of the Wills Act. I expect this rule to change if and when the new Wills, Estates and Succession Act is brought into effect.

What language is required in the will to satisfy the requirement that there is a declaration that the will is made in contemplation of the marriage? In most cases, the declaration is fairly clear. But what if the will does contain an express statement that the will is made in contemplation of marriage, but is made shortly before the marriage, provides substantial benefits to the testator’s fiancée, and refers to her as his spouse?

In a decision released yesterday, MacLean Estate v. Christiansen, 2010 BCCA 374, the British Columbia Court of Appeal took a flexible approach to the requirement of a declaration in the will that it is made in contemplation of marriage. In that case, the testator, Gordon MacLean, made a will on June 22, 2007, about a month and a half before his marriage to Karen Christiansen on August 11, 2007. He made the will after their engagement, and referred to Ms. Christiansen as his “spouse.” In the will, he created a spousal trust for her. An express statement that the will was made in contemplation of the marriage was inadvertently left out.

The Supreme Court of British Columbia held that the will did not meet the requirement that there be a declaration in the will that it is made in contemplation of the marriage, and that accordingly, the will was revoked by the marriage.

The Court of Appeal overturned the Supreme Court of British Columbia decision, and held that the will was made in contemplation of the marriage, and was not revoked by the marriage.

Madam Justice Kirkpatrick, writing for the Court of Appeal, held that there need not be a formal declaration in the will to satisfy the requirement if there is a written statement referable to the marriage.

In this case, the references to “my spouse KAREN CHRISTIANSEN,” the creation of a spousal trust in favour of Ms. Christiansen, and the appointment of “Karen” as trustee of the spousal trust were a sufficient written statement, referable to the marriage, for the will to have been made in contemplation of the marriage.

The Court said that the use of the word “spouse” was ambiguous in that it could refer to either a legal spouse or a common law spouse. Madam Justice Kirkpatrick looked outside of the wording of the will, and considered the evidence of the circumstances in which Mr. MacLean made the will to determine whether he intended to refer to Ms. Christiansen as his legal spouse as follows:

[38] The circumstances of the making of the will in this case were summarized in the appellant’s factum:
(a) The Will was made after joint tax and estate planning with Ms. Christiansen.
(b) Both Mr. MacLean and Ms. Christiansen were sophisticated financial professionals.
(c) The Will was executed after the wedding date and arrangements had been set.
(d) The solicitor preparing the Will knew of the wedding; was invited to and attended the wedding reception and advised Mr. MacLean and Ms. Christiansen on honeymoon travel arrangements to Italy.
(e) [The Will] was prepared at a time when Mr. MacLean and Ms. Christiansen were living in a stable, long-term, common-law relationship.
(f) The Will provides for benefits to Ms. Christiansen under a spousal trust.
(g) The Will speaks of Ms. Christiansen as his spouse.
(h) The Will addresses and balances the needs of Ms. Christiansen and of Mr. MacLean's children.
(i) As their wedding date approached in May 2007, Mr. MacLean told Ms. Christiansen that he intended to have a Will and Power of Attorney in place before they were legally married.

[39] When one examines the terms of the will and the circumstances in which it was prepared, there can be no doubt that Mr. MacLean intended that the will would survive his marriage to Ms. Christiansen and provide for her for the remainder of her life. On her death, the one-half of the residue of the spousal trust then remaining would form part of the residue for the benefit of the testator’s children. This was obviously a carefully constructed estate plan. The extrinsic evidence overwhelmingly supports the construction that “spouse” meant Mr. MacLean’s legal spouse, to whom he was, at the date of making the will, not married but was clearly contemplating marrying.

In the result, the will survived the marriage, and Mr. MacLean’s estate will be distributed according to the will.

Mawdsley v. Meshen

In British Columbia, the Wills Variation Act provides that the Supreme Court of British Columbia may vary a will if the maker of the will did not make adequate provision for his or her spouse or a child. But the Wills Variation Act does not give the court the power to vary dispositions outside of a will. Nor does the Wills Variation Act contain any anti-avoidance provision. The effect is that a spouse or child may be without a remedy if his or her spouse or parent (as the case may be) transferred his or her assets before death.

In a recent case, Mawdsley v. Meshen, 2010 BCSC 1009, Dennis Mawdsley claimed that his late common-law spouse of 18 years, Joan Meshen, fraudulently conveyed her assets to her children and her late husband’s brother to avoid her legal obligations to him. He relied on the Fraudulent Conveyance Act. He also asked the court to vary her will under the Wills Variation Act.

Joan Meshen had considerable wealth, much of which she accumulated together with, or received from, her late second husband, who died in 1983. Her assets at one time included her family home in Burnaby, two lots on East 11th Avenue in Vancouver, and a half interest in 10 acres in Surrey, and shares of three companies. The other half-interest in the Surrey property was owned by Joan Meshen’s late second husband’s brother, Bill Meshen, who worked in the family business and who had built his house on the Surrey property. She operated the family business through one company, another owned land used for the business and the third owned equipment in the business. She also had investment accounts, and cash which totaled over $180,000 at her death, and she kept in a jointly held safety deposit box with her daughter.

She had three children, Shirley Meshen and Harry Meshen from her first marriage and Michael Meshen from her second marriage.

In February, 2006, Joan Meshen was diagnosed with cancer. Her assets were then worth at least $10.5 million.

After her diagnosis, she transferred her bank accounts into joint accounts with her daughter, Shirley Meshen. The accounts held about $138,000 at the time of the transfer into joint accounts. She transferred title to her residence into the names of herself and her youngest son, Michael Meshen, as joint tenants. She transferred her interests in one of the lots on East 11th Avenue, and the Surrey property, as well as her interest in a contract to buy a condominium to her three children.

Joan Meshen made a new will on May 12, 2006, in which she left the contents of her house to her son Michael Meshen and divided the residue of her estate equally among her three children. On the same date, she established an inter vivos (or living) trust, and transferred a $3, 250,000 investment account, and her interest in the three companies into the trust. The beneficiaries of the trust on her death were her three children, and Bill Meshen.

Joan Meshen made no provision for her common-law spouse, either in her will, or by a transfer of property before her death.

Mr. Mawdsley brought a Wills Variation Act claim. One difficulty he faced is that if the various transfers of assets into the trust, and into the names of Joan Meshen’s children, or into joint tenancies with the children, were effective to pass all of her interest in those assets to the trust or to her children, then her estate was substantially depleted. Because the Wills Variation Act only applies to assets that fall into the estate, there would be little for Mr. Mawdsley to claim.

Mr. Mawdsley challenged the transfers under the Fraudulent Conveyance Act. Compared to most legislation, the Fraudulent Conveyance Act is mercifully short:

1 If made to delay, hinder or defraud creditors and others of their just and lawful remedies
(a) a disposition of property, by writing or otherwise,
(b) a bond,
(c) a proceeding, or
(d) an order
is void and of no effect against a person or the person’s assignee or personal representative whose rights and obligations by collusion, guile, malice or fraud are or might be disturbed, hindered, delayed or defrauded, despite a pretence or other matter to the contrary.
Application of Act

2 This Act does not apply to a disposition of property for good consideration and in good faith lawfully transferred to a person who, at the time of the transfer, has no notice or knowledge of collusion or fraud.

In two previous decisions of the Supreme Court of British Columbia, Hossay v. Newman (1998), 22 E.T.R. (2d) 150 (B.C.S.C.); Mordo v. Nitting, 2006 BCSC 1761, the Court has held that it is not a fraudulent conveyance if you transfer assets during your lifetime as part of an estate plan thereby avoiding claims under the Wills Variation Act, unless the person who may make a claim under the Wills Variation Act also has grounds to make a claim against you during your lifetime apart from a potential claim under the Wills Variation Act.

Mr. Mawdsley argued that he had a claim in unjust enrichment arising during Joan Meshen’s lifetime. He had assisted her with investments and with the family business, by, for example, assisting with the Goods and Services Tax returns. He argued that she had been enriched by his contributions, she had suffered a corresponding deprivation, and there was no juristic reason for her, or her estate, to retain the benefits of the enrichment.

Madam Justice Ballance dismissed Mr. Mawdsley’s claim that Joan Meshen fraudulently conveyed her assets to the trust and to her children. Joan Meshen was not motivated by an intention to defeat any claim by Mr. Mawdsley, including his potential claim under the Wills Variation Act, when she entered the transactions. She entered these transactions for other legitimate tax and estate planning objectives.

Although her lawyer had told her that Mr. Mawdsley told her about Mr. Mawdsley’s potential Wills Variation Act claim, Joan Mashen dismissed the idea that her common law husband would make a claim. She said that she and Mr. Mawdsley had an agreement that each would keep her or his property. Madam Justice Ballance found that they did have an agreement that apart from sharing some expenses, they would keep their property separate, and each was free to deal with her or his own property.

Joan Meshen did not enter these transactions secretively. Mr. Mawdsley had been in on meetings with Joan Meshen’s estate planning advisers as far back as 2000 in which she had discussions about transferring assets into a trust to benefit her children and Bill Meshen. He knew that she did not intend to leave him anything, and he did not object during her lifetime. He also knew that Joan Meshen had planned to leave her residence to her youngest son.

Furthermore, Madam Justice Ballance held that Mr. Mawdsley did not have a good claim in unjust enrichment. His contributions were minimal, and he had no expectations that he would benefit.

Mr. Mawdsley also claimed that Michael Meshen held the residence, and Shirley Meshen held the proceeds of the joint accounts and the cash in the safety deposit box on a resulting trust for Joan Meshen’s estate. There is a presumption when one person transfers assets to another gratuitously, that the transferee holds the assets in trust for the person who had transferred the assets. This is the presumption of resulting trust, and in British Columbia it applies to transfers from a parent to an adult child, but not from a parent to a minor child. The presumption may be rebutted if the person who receives title to the assets can prove it was a gift.

Madam Justice Ballance found that Joan Meshen intended to make a gift to Michael Meshen when she transferred the title to the residence into a joint tenancy with him. She had a longstanding intention to leave the residence to her youngest son, and had told others that he would receive on her death. Accordingly, the presumption of resulting trust was rebutted, and Michael Meshen is entitled to keep the residence as the surviving joint tenant.

Mr. Mawdsley was more successful in his claim that Shirley Meshen held the funds from the joint accounts and the safety deposit box on a resulting trust for her mother’s estate. Madam Justice Ballance found that Joan Meshen made the safety deposit box and bank accounts for convenience, and Shirley Meshen had not proven that her mother intended to make a gift to her.

Madam Justice Ballance then considered Mr. Mawdsley’s claim under the Wills Variation Act. She held that Joan Meshen had a moral obligation to Mr. Mawdsley, and that she failed to meet that obligation. She had not made adequate provision for him. Madam Justice Ballance took into consideration the fact that the children had received most of Joan Meshen’s assets outside of her estate, through the trust, and transfers of real estate. She awarded Mr. Mawdsley the residue of the estate consisting primarily of the funds from the bank accounts, and the cash in the safety deposit box less any estate liabilities. Madam Justice Ballance did not disturb the gift of the contents of the residence to Michael Meshen.

[Since writing this post, this decision was appealed to the Court of Appeal, which upheld Madam Justice Ballance's judgment. I have written about the Court of Appeal decision here.]